Arlan Hamilton, a venture capitalist, was quick to respond when Silicon Valley Bank (SVB) collapsed on March 10. As customers scrambled to pull out billions, Hamilton stepped in to support founders of color who were worried about losing access to payroll funds.
Hamilton, a Black woman with nearly ten years of business experience, saw the limited options facing these startup founders. SVB had been a vital ally for underrepresented communities, providing both financial and social capital. Its abrupt failure has rekindled discussions about the ongoing problem of lending discrimination in the banking sector.
Founded in 1983, SVB ranked as the 16th largest bank in the United States by the end of 2022. It played an essential role in the tech industry, offering banking services to nearly half of all venture-backed technology and life sciences firms in the country. Hamilton and other industry experts noted that SVB was dedicated to nurturing a community of minority entrepreneurs, often providing support when other banks would not.
Joynicole Martinez, a 25-year entrepreneur and chief advancement officer for Rising Tide Capital, emphasized the invaluable support provided by SVB. The bank regularly sponsored events and funded reports such as the annual State of Black Venture Report, led by BLK VC, a nonprofit that connects Black investors.
Minority business owners have historically faced hurdles in accessing capital due to discriminatory lending practices. Data from the Small Business Administration underscores disparities in loan denial rates, with only 16% of Black-led companies securing the full amount of business financing they sought in 2021, compared to 35% of White-owned companies.
Asya Bradley, an immigrant founder of multiple tech companies, noted that SVB's collapse triggered a rapid mobilization among immigrant business founders. Bradley joined a WhatsApp group of over 1,000 immigrant entrepreneurs to brainstorm alternative funding solutions in a system that often disregards them.
Many minority and immigrant entrepreneurs rely on community or regional banks like SVB because larger institutions frequently reject them. Bradley shared that she could only open a business account at one of the top four banks when her brother co-signed for her, illustrating the barriers faced by women and people of color in the banking industry.
The top four banks—JPMorgan Chase, Bank of America, Wells Fargo, and Citibank—have been criticized for their lack of support for minority businesses. However, they have made pledges to address economic and racial inequality. JPMorgan Chase, for instance, has stated that 30% of its branches are in lower-income neighborhoods as part of its commitment to Black and Brown communities, while Wells Fargo has partnered with the Black Economic Alliance to launch a $50 million fund for Black entrepreneurs.
Despite these efforts, Black-owned banks, crucial in closing the lending gap, have been declining in numbers. OneUnited Bank, the largest Black-owned bank in the U. S., manages just over $650 million in assets, a stark contrast to JPMorgan Chase's $3.7 trillion.
Hamilton's experiences in the early 2010s, when she struggled to find investors for her tech company, led her to start Backstage Capital, a venture capital fund focused on underrepresented founders. Since its inception, Backstage Capital has made over 120 diversity investments.
Hamilton remains hopeful that community banks, regional banks, and fintech firms will continue the work started by SVB. She hopes these institutions will rise to support minority entrepreneurs, ensuring that the progress made by SVB is not lost.
